Now, the holy grail is here. A slew of companies, including some local ones, are beginning to commercialize their products and raise substantial amounts of funding to create simple blood tests to detect conditions such as Down syndrome. The tests could someday replace amniocentesis procedures, which carry a risk of miscarriage. It’s also creating a competitive space in a $1.3 billion prenatal testing market.

Potential disruption

Pregnant women today regularly undergo basic screening, involving a blood test or ultrasound, said Dr. Ken Song, CEO of San Jose-based Aria Diagnostics Inc., one of the companies in this field of medicine. If that test raises concerns, the woman would then get an amniocentesis, in which a doctor inserts a needle into the womb and collects amniotic fluid to analyze.

The early tests are not very accurate and lead thousands of women every year to get the more invasive amniocentesis tests, even if they don’t need them. And amniocentesis carries a miscarriage rate of one half percent to 1 percent, Song said.

“That actually translates to a couple thousand or so normal, healthy pregnancies where the fetus is adversely affected, where there’s fetal death,” Song said. “We just think that’s appalling.”

Aria and other companies are now developing tests that can pick out the tiny amount of fetal DNA that is in a mother’s blood and analyze it, and it looks to be as accurate as an amniocentesis, Song said.

Money backs technology

Aria was only founded in May of 2010 and emerged from stealth just this month. It is planning to launch its product within the next few months. It already has raised $67.5 million, including a $52.7 million round announced Jan. 9.

Another company, Natera Inc. in Redwood City, also announced a $20 million round, on Jan. 6, and is gearing up for commercialization this year. It has raised more than $42 million in venture funding so far and won a $2 million grant last year from the National Institutes of Health for a clinical trial.

And Verinata Health Inc. announced in December that it moved from San Carlos to Redwood City to expand its facility and gear up for commercial launch this quarter.

The biggest name in the space and the only publicly traded company, San Diego-based Sequenom Inc., was the first to launch a prenatal diagnostic test for Trisomy 21, the triple chromosome that is the most common cause of Down syndrome, in October. Now, the others are looking to throw their hats in the ring.

“I think this first mover advantage is very significant for (Sequenom) if they can take full advantage of it,” said Kevin DeGeeter, a New York-based analyst with Ladenburg Thalmann & Co. “It’s like any other market. If a new competitor comes into the market and (a customer is) really happy with the service they’re already receiving, it’s a lot harder to displace them.” Sequenom announced in October that a clinical study showed its technology was able to identify Down syndrome cases with 99.1 percent accuracy. Amniocentesis testing is about 99.4 percent accurate.

Aria announced Jan. 12 that it is starting its own clinical trial of 25,000 women, and Natera’s NIH-funded study is ongoing.

Ethical, law concerns

As with any development in the genetics industry, prenatal testing is subject to ethical concerns. Some worry that easier testing will lead more people to terminate Down syndrome pregnancies, leading to fewer people with the condition and less support for them.

In addition, the companies are challenging each other over intellectual property: Sequenom has accused Natera of using Sequenom’s technology without a license. Natera filed a lawsuit in U.S. District Court on Jan. 6, asking the court to declare the company isn’t infringing on Sequenom’s patent.

Faced with stiff competition, the companies are also trying to distinguish themselves from each other.

Aria says it has developed a more targeted way to find the chromosomes it wants to look at, allowing the company to do one-tenth as much genetic sequencing and offer the test for a “fraction of the price” of other companies. Song said the cost of his test will be in the hundreds, while Sequenom’s test costs approximately $1,900.

Natera says it uses data from parents’ DNA and the Human Genome Project as part of its process, allowing the company to test earlier in the pregnancy with smaller amounts of fetal DNA. While other companies currently are just testing for Down syndrome, Natera CEO Matthew Rabinowitz said his company will start testing a much wider range of genetic conditions.

Natera, founded in 2004, has already been doing genetic testing of embryos used in in-vitro fertilization for a few years. It also launched a paternity test in August that uses a similar approach.

While the performance of each company’s test might vary, it’s now been established that the process and idea work, DeGeeter said.

“Dealing with the more commercial aspects of making sure the physicians who used the tests are happy with it, it performs well, and having discussions with payers and insurance companies,” DeGeeter said, “I think that’s the critical part for 2012.”

Diana Samuels can be reached or 408.299.1835 or dsamuels@bizjournals.com.